Unemployment could fall this year to close to where it was prior to the Covid-19 pandemic, according to a Goldman Sachs forecast that sees a hiring boom ahead.
The firm projects an unemployment rate of 4.1% that could be even lower depending on just how powerful the recovery gets amid more fiscal stimulus and a return to work for sectors hit hardest by the coronavirus.
“The main reason that we expect a hiring boom this year is that reopening, fiscal stimulus, and pent-up savings should fuel very strong demand growth,” Goldman economist Joseph Briggs said in a note. Though the forecast already is the lowest on Wall Street, there is still “some possibility of a return to the pre-pandemic rate in the mid-3s this year.”
In February 2020, just before the pandemic hit, the jobless rate stood at 3.5%, its lowest in more than 50 years. The rate ballooned to 14.8% in April 2020 amid business shutdowns aimed at curtailing the coronavirus spread, and now has fallen to 6.2% through February.
Still, total employment remains down about 8.5 million from where it was a year ago.
A return to work for displaced hospitality workers combined with another round of massive government spending is expected to keep driving that rate lower.
“Another key reason we expect a quick labor market recovery is that two-thirds of remaining pandemic job losses are in highly virus-sensitive sectors, where employment should rebound as the economy fully reopens,” Briggs wrote. “The sharp increase in the virus-depressed leisure and hospitality category in the February employment report provided an early hint of things to come.”
Indeed, the sector added 355,000 jobs in February, accounting for nearly all the 379,000 nonfarm payroll jobs added during the month, according to a Labor Department report Friday.
Moreover, there appears to be plenty of slack in the bar, restaurants and hotel space. The sector is still down nearly 3.5 million workers from where it was a year ago, and the unemployment rate there is still 13.5%, compared to 5.7% a year ago.
In addition to a boost in hospitality hiring, Goldman says government payroll growth also should help bring the jobless rate down. Government jobs are down 1.65 million from a year ago, and the group was the biggest drag on the February jobs report as it lost 86,000 positions.